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Bitumen Recovery Scheme – Oil Sands Conservation Act – Environmental Protection and Enhancement Act Application – Water Act – Aboriginal Impacts

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In this decision, the AER approved Prosper Petroleum Limited’s (“Prosper”) Oil Sands Conservation Act (“OSCA”) application to construct and operate a bitumen recovery scheme, including a central processing facility (“CPF”) and supporting infrastructure (the “Rigel Project” or the “Project”). The AER also approved Prosper’s Environmental Protection and Enhancement Act (“EPEA”) application for the construction, operation, and reclamation of the Rigel Project. In addition, the AER approved Prosper’s Water Act Application to withdraw 255,500 m3/year of nonsaline water from the Viking and Undifferentiated Drift formations. All of these approvals were subject to conditions.

Prosper’s Rigel Project Application

Prosper applied to the AER for approval of the following:

• approval under the OSCA to construct and operate a bitumen recovery scheme (the “OSCA Application”);

• approval under the EPEA for the construction, operation, and reclamation of the Project (the “EPEA Application”); and

• approval under the Water Act to withdraw 255,500 m3/year of nonsaline water from the Viking and Deep Drift formations (the “Water Act Application”).

The Rigel Project would use steam-assisted gravity drainage (“SAGD”) to produce a maximum of 1,600 m³ of bitumen per day from the Wabiskaw formation.

The proposed Rigel Project components included a CPF for steam generation and production, connected to six multiwell pads. Each pad would have eight horizontal SAGD well pairs (injection and production). Additional proposed surface facilities included observation wells, water source wells, production facilities, water treatment and recycling facilities, pipelines, support buildings, an access road, utility corridors and rights of way, a laydown area, sumps, borrow pits, and a construction camp.

Framework for Decision

The AER set out the following framework for its decision on the application:

(a)     The AER’s decisions must be consistent with its mandate set out in section 2 of REDA to “provide for the efficient, safe, orderly, and environmentally responsible development of energy resources in Alberta”;

(b)     With respect to Aboriginal impacts:

(i)      the AER must consider effects on treaty and Aboriginal rights when considering the OSCA, EPEA, and the Water Act;

(ii)     however, as expressly stated in section 21 of REDA, the AER does not have jurisdiction to consider whether Crown consultation for Rigel Project was adequate; and

(iii)    the Aboriginal Consultation Office (“ACO”) deals with the adequacy of consultation and provides a report to the AER.

(c)     Under section 10 of the of the OSCA, the AER:

(i)      must find approval of the Project to be in the public interest;

(ii)     may not issue an approval under section 10 of the OSCA without prior authorization from the lieutenant governor in council; and

(iii)    because the OSCA is an energy resource enactment, section 15 of REDA and section 3 of the REDA General Regulation require the AER to consider the Rigel Project’s social and economic effects, environmental effects, and effects on landowners.

(d)     Under sections 66 and 137 of the EPEA, the AER must consider whether approval of the Rigel Project’s CPF and associated infrastructure is consistent with the EPEA purpose of protecting the environment and promoting sustainable resource development while considering the need for Alberta’s economic growth and prosperity;

(e)     Section 20 of REDA requires the AER to act in accordance with the Lower Athabasca Regional Plan (“LARP”) since Prosper’s Rigel Project was located in the LARP area; and

(f)      Under section 49 of the Water Act, the AER must decide whether approving the Water Act Application would be consistent with the conservation, management, and wise use of water resources in Alberta.

OSCA Application re Bitumen Recovery Scheme

Public Interest

For the reasons summarized below, the AER found the Rigel Project to be in the public interest. The AER explained that the public it considered was all Albertans. The AER concluded that benefits to Albertans outweighed the burdens.

In considering the public interest, the AER considered the following:

(a)     safety and efficiency;

(b)     impacts on existing rights of Aboriginal people;

(c)     impacts on the environment (addressed in its consideration of the EPEA); and

(d)     social and economic Impacts.

Safety and Efficiency

The AER found that Prosper would meet or exceed the relevant regulatory requirements and be able to operate the Rigel Project safely.

The AER found that Prosper’s Emergency Response Plan (“ERP”), including spill response, adequately addressed the following:

• eliminating potential ignition sources;

• lessening the severity of a spill;

• notifying appropriate personnel, spill responders, and regulatory officials;

• identifying the type and extent of the spill;

• identifying the spilled material;

• identifying equipment, services, and assistance required;

• determining appropriate ways of containing and cleaning up the spill; and

• documenting all actions.

Efficiency

The AER was satisfied that Prosper’s bitumen recovery scheme for the Rigel Project would be efficient because it was designed to maximize recovery of the oil sands resource, while minimizing adverse impacts.

Fort McKay Métis Community

The AER explained that the Supreme Court of Canada has said that the rights of Métis peoples that are protected under section 35 of the Constitution are those practices integral to the distinctive culture of the community at the time of effective European control of the relevant area.

For the purpose of this decision, the AER considered Fort McKay Métis to be a rights-bearing community with the rights to hunt and harvest on the lands and waters extending from Fort McKay west to Moose Lake and south to include the Prosper lease.

For the reasons summarized below, the AER determined that the possible limitation on the Fort McKay Métis community members’ choice of where and when to exercise their Aboriginal rights was significant enough to weigh in the public interest balance, but not significant enough to tip the balance against the Rigel Project.

With respect to impacts on traditional fishing uses, the AER found that:

(a)     the Fort McKay Métis community had used and currently uses lands on and near the Moose Lake reserves for hunting, trapping, and fishing;

(b)     Moose Lake was an important year-round fishery for members of the community; and

(c)     some members of the community might be afraid to eat fish from Moose Lake if more oil sands development occurred in the area.

However, the AER was not persuaded that Prosper’s Rigel Project would likely result in harm to the fishery in Moose Lake.

With respect to its ability to pass on traditional knowledge, the AER found that:

(a)     it was very important to the community to be able to continue to learn and pass on traditional knowledge and practices such as hunting, trapping, and fishing for food in the Moose Lake area;

(b)     to continue to exercise their Aboriginal rights, Fort McKay Métis community members must be able to continue to pass on traditional knowledge; and

(c)     industrial activity on the lands comprising the Prosper lease might cause members of the community to value/perceive the lands and the resources the lands support differently than they do now and that this was a negative social effect.

However, the AER was unable to conclude that approval of the Rigel Project would prevent Fort McKay Métis from continuing to exercise its Aboriginal rights in its traditional territory.

Social and Economic Impacts

Directive 023 sets out application requirements to allow the AER to assess the social and economic effects of proposed oil sands projects (e.g. population, housing, employment, economic activity, transportation, infrastructure and services, taxes, royalties, gross domestic product, labour income, capital costs, and annual operating expenditures).

With respect impacts on the demand for housing, traffic, and local infrastructure, the AER made the following findings:

(a)     because camps would be used for construction, drilling, and operations, population effect on the region would not increase demand for housing in the region;

(b)     the increase in overall traffic volume resulting from the Rigel Project would be minimal and that Prosper’s commitments and proposed mitigation are acceptable; and

(c)     any demand on local infrastructure and services that results from the Rigel Project would be within existing capacity.

With respect to economic benefits, the AER found that the economic benefits expected from the Rigel Project would be substantial for a project of its size, particularly regarding royalties to Alberta, taxes to all levels of government, and employment income.

Additional Public Interest Considerations

The AER found that, based on the above, the balance between the overall economic benefits, including employment, and the negative impacts of the Prosper Rigel Project were more or less even. To answer the question of whether the Rigel Project was in the public interest, the AER considered the following additional public interest factors:

(a)     Fort McKay First Nation’s argument that the AER should not frustrate the Moose Lake Adaptive Management Plan (“MLAMP”) negotiations;

(b)     Prosper’s submissions about the desirability of regulatory and investment certainty; and

(c)     Public policy guidance expressed through the OSCA, EPEA, the Water Act and REDA.

For the reasons summarized below, the AER determined that approval of the Rigel Project was in the public interest.

The AER found that the Fort McKay First Nation’s assertion that the AER approval not frustrate MLAMP negotiations did not tip the public interest balance against approving the Rigel Project, based on the following:

(a)     to the extent that Fort McKay First Nation frames LARP and MLAMP as elements of Crown consultation, section 21 of REDA prohibits the AER from assessing their adequacy;

(b)     LARP prohibits decision makers, including the AER, from “adjourning, deferring, denying, refusing, or rejecting any application…” by reason only of incompletion of a LARP regional plan;

(c)     the AER could not deny Prosper’s application solely because MLAMP negotiations were not yet complete; and

(d)     given that AER approval of an application made under section 10 of OSCA was subject to prior authorization by Cabinet, Cabinet was the most appropriate place for a decision on the need to finalize MLAMP.

The AER found that the following factors weighed on the positive side of the public interest balance for the Rigel Project:

(a)     section 10 of the OSCA was clear that an application for an oil sands scheme may be approved if it is found to be in the public interest, but that such an approval is not a foregone conclusion;

(b)     consistency in regulatory decisions was desirable, but each OSCA application must be assessed on its own merits and in light of the relevant regulatory, legal, and factual frameworks;

(c)     in this case, Prosper made a concerted effort to minimize impacts of the Rigel Project, often committing to going beyond the minimum regulatory requirements and addressing concerns of the participants and others – all while maintaining substantial economic benefits for a project of its size;

(d)     the purposes provisions of the OSCA read with the AER mandate provisions in REDA and the purposes provisions of EPEA and the Water Act were clear that the public interest lies in striking a balance between the economic benefits to Alberta and protecting the environment, promoting sustainable resource development, and ensuring the conservation and wise use of water; and

(e)     Prosper’s Rigel project struck that balance.

Based on the above, including the additional considerations, the AER found the Rigel Project to be in the public interest.

EPEA Application

For the reasons summarized below, the AER concluded that approving Prosper’s EPEA Application was consistent with protecting the environment and promoting sustainable resource development while considering economic growth.

The AER found that:

(a)     with the mitigations proposed by Prosper and the standard EPEA conditions for soil conservation, contamination, and monitoring, impacts on soils would be consistent with EPEA goals;

(b)     long-term impacts of clearing vegetation were uncertain, and short-term impacts of vegetation loss during the life of the Project and until reclamation were unavoidable;

(c)     the evidence did not suggest that the short-term impacts of the Rigel Project on vegetation were inconsistent with the purposes of EPEA or that they were likely to cause unacceptable ecosystem impacts; and

(d)     Prosper’s mitigation measures and compliance with the relevant regulatory provisions, would ensure that the expected effects on vegetation would not make the Rigel Project inconsistent with the purposes of EPEA.

The AER confirmed that the Rigel Project was not subject to the Alberta Wetland Policy because Prosper had completed the relevant filing requirements before the date that policy was implemented in the Green Zone of Alberta.

The AER found that, with Prosper’s mitigation commitments, the Rigel Project was consistent with the purposes of the EPEA.

Air Quality

The AER explained that Prosper was required to comply with the Alberta Ambient Air Quality Objectives and Guidelines (“AAAQO”) issued by Alberta Environment and Parks. To meet this requirement, Prosper conducted an air quality assessment to identify emissions associated with the Project. Prosper modelled expected maximum ground-level concentrations of sulphur dioxide (SO2), nitrogen dioxide (NO2), carbon monoxide (CO), and atmospheric particulate matter (PM2.5) associated with project operations.

The concentration of each pollutant was calculated and compared with the AAAQO. The results showed that air emissions from the Rigel Project were well below the applicable air quality objectives.

The AER found that the Rigel Project complied with all applicable AAAQOs.

Habitat Loss

The Rigel Project would be located about 64 km from Fort McKay, west of the Athabasca River. The AER noted that there was significant oil sands development and other resource and industrial development in the area.

The AER explained that it had to make its decision based on project-specific impacts, including the likelihood and severity of those impacts. A decision to halt resource and industrial development generally in an area (i.e. unacceptable regional cumulative effects, as suggested by Fort McKay First Nation), was a policy-level decision that the AER had no authority to make.

The AER determined that it was not able to conclude that the Rigel Project would cause loss of habitat resulting in permanent harm to the ecosystem in the Moose Lake area.

Reclamation

Under the EPEA, the goal of reclamation is to return areas disturbed for industrial development to equivalent land capability, which it defines as “….the ability of the land to support various land uses after conservation and reclamation is similar to the ability that existed before an activity being conducted on the land, but that the individual land uses will not necessarily be identical.”

The AER found that Prosper’s reclamation plans were reasonable and appropriate at this stage of project development.

Water Act Application

Introduction

The AER considered whether the proposed water withdrawals were consistent with the purpose of the Water Act and related guidelines, including the Water Conservation and Allocation Guideline for Oilfield Injection (“WCAGOI”). The AER explained that:

(a)     the objective of the guidelines is to minimize the use of fresh water whenever possible;

(b)     applicants needing water for oilfield injection must conduct a comprehensive assessment of available saline and nonsaline sources;

(c)     applicants must also meet requirements in the Alberta Environment Guide to Groundwater Authorization, 2011 (AGGA); and

(d)     applicants must justify the need for the water and confirm that the aquifer is capable of sustaining the amount of water required over the life of the project without adversely impacting other licensed users or existing households.

Application

Prosper’s Water Act Application requested approval to use water from two existing water supply wells:

(a)     620 m3/d, or 226 300 m3/year, from the 8-20 well completed in the Deep Drift aquifer; and

(b)     80 m3/d, or 29 200 m3/year, from the 8-28 well completed in the Viking aquifer.

Total withdrawals would be 700 m3/d, or 255 500 m3/year, over the life of the Project, which is expected to be 25 years beginning in October 2019. The water is for steam production and utility purposes at the Rigel Project.

AER Findings

The AER found that:

(a)     Prosper’s examination of the potential impacts of its groundwater withdrawals was robust and reliable;

(b)     the Deep Drift and Viking aquifers had sufficient sustainable yield to meet the needs of the project without affecting the integrity of the aquifers;

(c)     with respect to saline alternatives:

(i)      taking water from the Cooking Lake aquifer (potential saline alternative) would create additional environmental and habitat disturbances;

(ii)     these disturbances would also cause more impacts on traditional land use for Fort McKay Métis and Fort McKay First Nation; and

(iii)    these impacts were significant and were not acceptable;

(d)     Prosper’s withdrawals would not adversely impact the aquifers, the aquatic environment, or other licensed users; and

(e)     the inclusion of surface water monitoring exceeded regulatory requirements for this type of application.

Conclusion

Based on the above and considering the conditions of approval, the AER determined the following:

• Prosper’s Rigel Project was in the public interest, taking into account its expected impacts on Aboriginal and treaty rights and traditional land use, its expected social and economic impacts, its impacts on the environment, and its impacts on landowners;

• Prosper’s EPEA Application to construct, operate, and reclaim the Rigel Project CPF and associated infrastructure was consistent with protecting the environment and promoting sustainable resource development while considering the need for Alberta’s economic growth and prosperity; and

• Prosper’s Water Act application was consistent with the conservation and wise use of water resources in Alberta, taking into account economic growth and prosperity, the need to maintain a healthy environment, and the effects of the proposed diversion on the aquatic environment.